Danish Cooperatives and Foundations as forms of corporate governance Peer Hull Kristensen and Glenn Morgan

Corporate forms and social structures during industrialisation Organizational forms and experimentalism during early period of industrialisation – collective forms (coops, friendly societies, mutuals etc) and different forms of private property. Influence of existing social structure over distribution and dominance of different forms More unequal societies moved towards stronger forms of private control where inequality of distribution was more strongly built in. Less unequal societies created stronger collective institutions and organizational forms Diversity within and across societies threatened by neo-liberalism

Danish industrialisation and organizational forms: the roots of cooperation Central role of cooperatives in small railway towns Importance of self-help movements Dominant social position of craft workers reinforced by development of training schools etc. Rise of craft production model and dynamic small firms in clusters and localities Supported by extensive trade union organization and emergent Danish welfare state Embeddedness of economic organization in strong institutions and social relations – both local and national

Large scale production and finance Centred in Copenhagen Tietgen founded a private bank and tried to form and consolidate large scale firms e.g. Tuborg as integrated firm Finance driven model of production Tietgen also sought to dominate areas such as slaughterhouses etc which led to competition with emerging cooperatives To compete against Tietgen and large scale production, the cooperative and craft sector had to modernise and find advanced forms of production, manufacture and distribution

The challenges of growth: Cooperatives Local coops have amalgamated into national cooperatives which have in turn gone international – Arla, Danish Crown Have become major exporters Have issued bonds in financial markets Have been instrumental in innovation Has led to problems of centralization and distancing from local communities But remain cooperative in structure and distribution as well as contributing to local developments

The Challenges of growth: family firms and the rise of Foundations Firms that have developed through organic growth and self-financing What structure for firms as they grow beyond original founders and seek to avoid business being destroyed by second generation and high taxes? Danish firms looked for ways to sustain continuity and social purposes. First Foundation – Carlsberg 1876 – became rapidly popular form 1400 Foundations in Denmark 100,000 employees in Denmark, 200,000 abroad 5% domestic employment 8% of private employement 5-10% GDP contribution (Thompson 2014)

Legal characteristics of Danish Foundations Creation by donation of company shares to Foundation Independence of Foundation: self-selected governing body Governance by Charter spelling out philanthropic purposes as well as detail on stucture Governance by a board of nominated members - the Foundation acts at its own discretion subject to its charter and supervision by government bodies. The Foundation may be sole owner of a business or majority owner or it may control the corporation through a differentiated share structure of A and B shares

Effects of Foundation ownership at general level Patient capital – supports R&D over long terms Philanthropic programmes affecting education, culture and development in Denmark and overseas Focus on social responsibility for localities, for the country as a whole and for broader development objectives

Examples of Foundations’ impact on economic strategies and development Inside Denmark Maersk and Odense shipyard redevelopment Novo Nordic: support for extra training leading to skills upgrading Danfoss: supporting new clusters of firms in home locality Beyond Denmark Grundfoss: Life link – drinking water project Danfoss: China district heating system Novo Nordic: China: physician training Diabetes awareness in Asia

Overall conclusions Organizational forms reflect, reproduce and impact on the social structure of societies – they are particularly affected by degrees of inequality, power and differentiation Shareholder value driven corporations reflect and enable more unequal societies Societies characterised by less inequality have produced and sustained different organizational forms. Globalization, neo-liberalism and financialization have put pressure on these different forms but they remain deeply embedded in some contexts. Creating more diversity of forms is also about creating new social relations which challenge expanding inequalities and power differences.